Enforcement
Amended Regulations Governing Foreign Investments by Insurance Companies(2013 . 05 . 03 Amended)
2014-02-25
Article 2 | Definitions of the phases referred to herein are as follows: 1.“Foreign government” means the central government of a foreign country. 2.“Foreign bank” means a foreign bank which is ranked among the world’s top five hundred banks in terms of its capital or assets or has established a branch within the territory of the Republic of China (“ROC"). 3.“Foreign credit rating agencies” mean Moody’s Investors Service, Standard & Poor''s Corp. and Fitch Ratings Ltd. 4.“Local credit rating agencies” mean Taiwan Ratings Corp. and Fitch Ratings Ltd., Taiwan Branch. 5.“Overseas and Mainland China area real property” means the land in a foreign country and Mainland China area and any buildings thereon, the right to the yields from such land or the right to develop such land and construct buildings thereon. 6.“Relationships of control and affiliation” have the same meaning as in Articles 369-2 and 369-3 of the Company Act and Article 6 of the Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises. The total amount of the investment items as referred to as being rated by foreign credit rating agencies under these Regulations is calculated in the following manner: 1.In cases where the rating level of such investment is above the minimum credit rating level as set forth hereunder, the total amount of the investment shall be calculated based on the amount of investment that remains at a certain level when or after the investment is made as well as the amount of the investment that is upgraded or downgraded after the investment; 2.Save as otherwise provided in the preceding paragraph, in cases where such investment meets the minimum credit rating level set forth hereunder, the total amount of investment shall also include the total amount of investment downgraded under a certain rating level after the investment; provided that, however, if such investment is downgraded to a certain rating level that is not permitted hereunder, such investment shall be handled in accordance with the relevant insurance laws and regulations. |
Article 6 | Where an insurer invests in the foreign currency denominated commercial papers referred to in Subparagraph 4 of Paragraph 1 of Article 5, the issuer or the guarantee providers of such commercial papers shall have a credit rating equivalent to BBB+ or above from the foreign credit rating agencies. The total amount of foreign currency denominated commercial papers issued or guaranteed by a company and the securities which are purchased from the same company that comply with each provision of Paragraph 1 of Article 7 shall not exceed 5% of the insurer’s funds and 10% of the Shareholders'' Equity of the issuing company but excluded those which are subject to the provisions in paragraph 1 of this article. If the corporate bonds and commercial papers invested by an insurer is guaranteed by a third party and meet the following conditions, the total amount of foreign currency denominated commercial papers issued or guaranteed by a company, as well as those guaranteed by the third party, and the securities which are purchased from the third party that comply with each provision of Paragraph 1 of Article 7 shall not exceed 5% of the insurer’s funds and 10% of the Shareholders'' Equity of the third party: 1.The third party and the company have prepared consolidated financial statements in accordance with generally accepted accounting principles (GAAP). 2.The Shareholders'' Equity of the third party exceeds that of the company. |
Article 7 | The listed or over-the-counter certificates of foreign stocks or bonds referred to in Subparagraph 5 of Article 5 include: 1.stocks; 2.initial public offerings of stocks; 3.corporate bonds; and 4.depositary receipts, convertible bonds and warrant bonds issued by companies overseas. Where an insurer invests in the aforementioned corporate bonds or the convertible or warrant bonds issued or guaranteed by a foreign company, the issuing company or the guarantee-provided company shall have a BBB+ or above equivalent credit rating from the foreign credit rating agencies. Provided that, however, in cases where there are no major disciplinary actions for violations of the Act in relation to foreign investment in the most recent year, or the rectification of those violations has been carried out and affirmed by the component authorities, such may be handled in the following manner: 1.In cases where the risk-based capital ratio at the end of the most recent period of the insurer is above 200% and a risk management committee subordinate to the board of directors, a chief risk officer, as well as an interior risk management department, have been established to assume responsibility for the overall risk management of the company, for the investment in the corporate bonds as set forth in the preceding paragraph, the issuer or the guarantor of such investment may have a credit rating equivalent to BBB or above by foreign credit agencies. 2.In cases where the insurer meets the requirements set forth in the preceding sub-paragraph and the risk-based capital ratio at the end of the most recent period is 250% or above, or is rated as AA or above as rated by domestic or foreign credit rating agencies in the most recent year, for the investment in the corporate bonds, convertible bonds or warrant bonds issued by foreign companies, the issuer or the guarantor of such investment may have a credit rating equivalent to BBB- or above, provided that the risk limit is set by the board of directors and monitored by the risk management committee or the risk management department. 3.In cases where the insurer meets the requirements set forth in the preceding sub-paragraph, such insurance company may invest in corporate bonds issued or guaranteed by companies that have a credit rating equivalent to BB+ or above as rated by foreign credit agencies, have been reviewed and listed by the insurance association, and have been filed with the component authorities for reference, or convertible bonds and warrant bonds issued by non-domestic companies. The insurer’s investment in the securities specified in Paragraph 1 and 2 of this Article shall be subjected to the following provisions: 1.The total amount of the securities purchased by the insurer from each company shall comply with the provisions of Paragraph 2 or paragraph 3of the preceding article; 2.In cases where an insurer invests in the corporate bonds issued or guaranteed by a company with a credit rating equivalent to BBB or BBB- or BB+ as rated by foreign credit agencies, convertible bonds and warrant bonds issued by non-domestic companies in accordance with the preceding paragraph, the total amount of such investment shall not exceed 10% of the owner equity of an insurer. 3.In cases where an insurer invests in corporate bonds with a credit rating equivalent to BB+ as rated by foreign credit agencies, convertible bonds and warrant bonds issued by non-domestic companies in accordance with the preceding paragraph, such investment shall not exceed 2% of the approved foreign investment limit of that insurance company. 4.In cases where an insurer invests in corporate bonds with a credit rating equivalent to BBB+ ~ BB+ as rated by foreign credit agencies, corporate bonds and warrant bonds issued by non-domestic companies in accordance with the preceding paragraph, the total amount of such investment is subject to 12% of the approved foreign investment limit or 60% of the owner equity, whichever is higher. 5.Where the insurer invests in corporate bonds, convertible and warrant bonds issued or guaranteed by the companies with a credit rating equivalent to BBB+ to BB+ from the foreign credit rating agencies, the amount and conditions of the abovementioned investments shall comply with Article 17; 6.The total amount of the insurer’s investment in the securities specified in Subparagraphs 1, 2 and 4 of Paragraph 1 of this Article shall not exceed 40% of the foreign investment limit imposed in accordance with Article 146-4 of the Act. |
Article 11 | For insurance company''s investment in real estates overseas and those in the Mainland China area, such investment shall be limited to those that have been legally utilized and have generated profits at the time of investment and shall be subject to the following restrictions: 1. The ratio of regulator capital to risk-based capital at the end of the most recent period is at least 200%. 2. There are no major disciplinary actions for violations of the Act in relation to foreign investment in the most recent two years and there are no major violations of the internal control procedures governing various applications of funds in the most recent two years, or rectification of those violations has been carried out and affirmed by the competent authorities. 3. The board of directors shall establish a risk management committee or the company shall set up a risk management department and a chief risk officer in charge of overall risk management. Unless specified otherwise, the total amount of the investment as set forth in the preceding paragraph shall not exceed 10% of the owner equity of the insurance company. The requirement that the real estate has been legally utilized and generated profits at the time of investment as set forth in paragraph 1 means that rent ratio is above 60% and meets the return on investment corresponding to the local economy. |
Article 11- 1 | The insurer may invest in real estate overseas and in the Mainland China area in any of the following ways: 1. To obtain real estate overseas and in the Mainland China area in its own name. 2. To obtain real estate overseas or in the Mainland China area through real estate investment business for special purpose of investment. Real estate investment business for special purpose of investment, as referred to in the preceding paragraph, means those enterprises 100% owned by the insurer, as approved by the component authorities exclusively for the purpose of investment in real estate overseas or in the Mainland China area. The operation of real estate business for special purpose of investment shall be subject to the following restrictions: 1. The business scope of such company shall be confined to purchasing, holding, maintaining, management, operation or disposal of real estate and real estate related rights. 2. Such business shall not seek loans from outside sources, or act as a guarantor, or provide its property as a security for the indebtedness of others; its funds shall be limited to the following purposes: (1) For the payment of relevant costs and expenses incurred in connection with the business operations as set forth in the preceding paragraph; (2) For deposits with financial institutions. 3. The various revenues received by that business shall, except for the portion which should be reserved to meet essential operating needs, be remitted back to the parent company within six months after the final annual accounts are audited by the Certified Public Accountant(s). In cases where an insurer invests in real estate investment business for special purpose of investment, such insurer shall duly submit to the competent authorities for prior approval for each and every object of real estate overseas and in the Mainland China area that it proposes to acquire: 1. A business plan, which shall at least include category, location, floor space (area), business development plan, business principles and guidelines. 2. An explanation as to the transparency of the real estate registration system where the relevant real estate overseas or in Mainland China is located and that said system is publically traceable. 3. An analysis in various phases of the capital or the amount of investment that the insurer proposes to make. 4. List of the proposed responsible person(s). 5. An overview of the business operations of the invested real estate overseas and in the Mainland China area and the real estate investment business for special purposes of investments that have been established. 6. Proof that the real estate has been legally utilized and generated profits at the time of investment. 7. Other document(s) as required by the competent authorities. In cases where an insurance company invests in real estate investment business for special purposes of investment in the Mainland China area, such shall be subject to the approval of the Ministry of Economic Affairs in accordance with the Act Governing the Relations between the People of the Taiwan Area and the Mainland China Area. In cases where an insurance company sets up real estate investment business for special purposes of investment overseas and in the Mainland China area, the ''Regulations for Establishment, Transfer, or Withdraw Branch Units by Insurance Enterprises '' and ''Regulations for Establishment, Transfer, or Withdraw Branch Units by Insurance Enterprises '' is not applicable. An insurance company shall submit the following documents of real estate investment business for special purposes of investment for the reference of the competent authorities within three months of the end of the fiscal year. 1. A summary of the internal audit. 2. A financial report audited by the Certified Public Accountant(s). 3. A summary of the basic information in relation to the operations. 4. Other documents as required by the competent authorities. In cases where an insurer and the real estate investment business acquires or disposes of the real estate that it has invested overseas and in the Mainland China area, it is required to obtain an appraisal report issued by an international appraisal institution that is qualified locally, and the mandated institutions in charge of the management are limited to international real estate management companies. In cases where the investment is made through the real estate investment business for special purposes of investment, it is also required to obtain a legal opinion as regards its legality issued by local qualified counsel; the following items shall be disclosed within three days after the acquisition of such documents in the website of the insurance company: 1. The location of the overseas and Mainland China area real estate. 2. Information proving the fair market value. 3. Ownership, area and use condition of the property. The appraisal companies and the real estate management companies set forth in the preceding paragraph shall meet the following requirements 1. Appraisal companies are limited to those incorporated and registered with the competent authorities in OECD countries or the Republic of China and have offices of business in the place where the proposed invested overseas real estate or the real estate investment business for special purposes of investment and the Republic of China. 2. Real estate management companies shall meet any of the following requirements, provided that, however, that if the invested real estate is managed by an existing real estate management company and that such contract does not mature, or the real estate management company shall be jointly determined by the co-owners of the real estate, such provision is not applicable: (1). Publicly available documents proving that such real estate management company has been incorporated in the place where the real estate proposed by the insurance company is located for at least three years and has experience in managing commercial building with floor space of at least 35,000 square meters and assets of NTD 10 billion or equivalent foreign currencies. (2). Concrete and public information proving that such real estate management company ranks among the top five real estate management companies in terms of revenue for the most recent year. In cases where an insurer invests in overseas and Mainland China area real estate in accordance with paragraph 1, such company shall include the handling procedure in relation to the investment in overseas and Mainland China area real estate in internal controls, and have the board of directors to adopt it; such also applies to amendment. The handling procedure shall include at least the following matters: 1. Investment guidelines, strategies, and responsible departments. 2. Evaluation, transaction, management and handling procedure. 3. Risk management measures. For the risk management measures as referred to in the preceding paragraph, sub-paragraph 3, its risk control shall include a control mechanism of different levels with reference to credit rating information provided by foreign credit rating agencies in relation to foreign countries and the Mainland China area where the real estate is located and shall set up risk limits for each level and country. For an insurer that engages in overseas real estate investment, such company shall designate staff with relevant experience or professionally trained personnel, and submit an investment assessment report for each case to the board of directors for authorization and handling. |
Article 12 | In cases where the board of directors of an insurer has adopted the relevant transaction procedures and risk management measures and determines the foreign currency risk limit each year for which the risk management committee or risk management department monitors periodically, such company may use its funds in items denominated in RMB. Provided that, however, the use of funds of such company in relation to government or corporate securities is limited to the following items and the risk-based capital ratio of the most recent period at the time of the investment shall be at least 200%, and there is no situation as listed in Article 17, paragraph 2, sub-paragraphs 1 and 3: I. Government bonds and treasury bills in the Mainland China area, including those traded among banks on the bond market. II. The stocks transacted in the centralized markets and the initial public offering (IPO) stocks before being listed in centralized market. III. Corporate bonds and financial bonds traded on the centralized market or among banks in the Mainland China area. IV. The securities investment funds and Exchange Traded Funds (ETF) listed in the Mainland China area. V. Transactions of financial derivatives may be engaged for hedging purposes within the actual investment amounts under Subparagraphs I to IV of this Paragraph. In cases where an insurer uses its funds in items denominated by RMB in accordance with the preceding paragraph while the risk-based capital ratio is less than 200%, such company may engage in investments as set forth in sub-paragraph 1 and sub-paragraph 5 of the preceding paragraph, provided that the total amount of such investment shall not exceed 5% of the foreign investment limits approved for that insurance company. Where an insurance company invests in the corporate bonds listed in Subparagraph III of the paragraph 1, the issuer or guarantee provider of the abovementioned bonds shall have the credit rating as evaluated by the foreign credit rating institution(s) up to or above A- or the equivalent level. The competent authority may, if necessary, restrict the investment items that the funds of an insurer may be used for as enumerated under paragraph 1. The investment items enumerated under Paragraph I shall further satisfy the following requirements other than compliance with the terms of investment and quota set forth in these Regulations: I. The total amount of investment in the government bonds and treasury bills in the Mainland China area shall not exceed 5% of the approved limit on foreign investment for that insurance company. II. The total amount of investment in the securities issued by the same corporation with attributes satisfactory to Subparagraphs II and III of Paragraph I shall not exceed 1% of the approved limit on foreign investment for such an insurance company and shall not exceed 10% of the issuer’s Shareholders'' Equity. III. The total amount of investment in each of the securities investment funds and exchange traded funds listed in the Mainland China area shall not exceed 1% of the approved limit on foreign investment for that insurance company and shall not exceed 10% of the total amount already issued by that fund. IV. The grand total of investment in securities and exchange traded funds as defined under Subparagraphs I~ VI under Paragraph I shall not exceed 10% of the approved limit on foreign investment for such an insurance company. An insurance company shall, while utilizing funds defined under various Subparagraphs of Paragraph I, faithfully comply with requirements by the laws and ordinances concerned and the internal operating norms regarding utilization of the funds. The non-life and life insurance company shall, respectively pursuant to the requirements set forth in Article 11 of Regulations Governing Public Disclosure of Information by Non-life Insurance company and Article 11 of the Regulations Governing Public Disclosure of Information by the Life Insurance Companies, make disclosure to the public under the notes which should be made under the information disclosure website the total amount of the funds utilized for investment under Paragraph I and the profitability performance and shall keep such information renewed on a quarterly basis. |
Article 15- 2 | Any insurance company that meets the following conditions may file an application with the competent authority for the amount to be excluded from the calculation of the limit on the total amount of foreign investment under the first part of Paragraph 2, Article 146-4 of the Act (Hereinafter "Excluded Foreign Investment Amount"): 1.Meeting the requirements under Sections 1 to 3, Paragraph 1 of the previous article. 2.The total amount of funds utilized in domestic investments by the insurance company as a percentage of the amount of funds that may be utilized, less various reserves for non-investment-linked life insurance business collected and paid in foreign currency, meets the requirement of the applicable limit stipulated under these Regulations. 3.The insurer’s risk-based capital ratio for the latest period is 200% or higher. 4.The board of directors will determine the risk limit every year and the risk control committee or the risk control department shall perform regular control. The Excluded Foreign Investment Amount referred to in the previous section is calculated as follows: Excluded Foreign Investment Amount = (25% of various reserves for non-investment-linked life insurance business, or various reserves for non-investment-linked life insurance business collected and paid in foreign currency, whichever is lower) x (1 – determined percentage). “Determined percentage” referred to in the previous section means the percentage of foreign investment by insurance company determined by the competent authority under Paragraph 4, Article 15. If such percentage is changed, the above limit shall be re-calculated based on the changed determined percentage. In filing an application for Excluded Foreign Investment Amount, the insurance company shall submit the following documents to the competent authority for approval: 1.Documents listed under Paragraph 3 of the previous article. 2.Explanatory or justification document showing compliance with Sections 2 to 4, Paragraph 1. 3.Other documents as required by the competent authorities. In cases where an insurer meets the relevant requirements as set forth in the preceding paragraph, and has obtained the approval from the competent authorities that the investment shall not be included in the foreign investment limits in accordance with paragraph 2, such company may submit the documents as required in the preceding paragraph, a business development plan, the proposed amount that is not included in the foreign investment limits and an explanation of assessment of reasonableness thereof, to the competent authorities for special approval, and the formula set forth in paragraph 2 is not applicable. After the competent authority grants an approval for any insurance company to calculate the amount of foreign investment in accordance with the flexible adjustment formula under the previous article, when the competent authority grants approval for the Excluded Foreign Investment Amount in accordance with Paragraph 1, it shall cancel the approval for calculation of foreign investment amount calculated based on such flexible adjustment formula. In case any of the following occurs after an insurance company is granted approval of Excluded Foreign Investment Amount, it shall prepare an adjustment plan, have it approved by its board of directors and file it with the competent authority for reference. The following correction shall also be completed within one month from the occurrence of the fact: 1. The various reserve funds set aside under the Act for the operation of any non-investment type of personal insurance activity have not been utilized for the fund utilization items for the same currency(ies) under these regulations. 2. Failure to comply with Subsection 2, Paragraph 1. Any insurance company fails to comply with the previous section, fails to complete adjustment in accordance with the adjustment plan or fails to file the adjustment plan as required under the previous section for 2 or more times on accumulated basis, the competent authority may revoke the approval for Excluded Foreign Investment Amount under Paragraph 1 and 5. |
Article 16 | An insurer may put its foreign investment assets under its own custody or under custody of such custodian institutions with a credit rating equivalent to or above A- from domestic or foreign financial institutions in the preceding year. The insurer with its foreign investment limit equivalent to or above 35% of its funds or with its overall foreign investment reach to or above US$1 billion shall put together all its foreign securities, except those of outstanding overseas funds and those from special-purpose money trust funds conducted by financial institutions, under custody in one or at most five custodian institution. |
Article 17 | The aggregate amount of the following investments shall not exceed 5% of the disposable funds of the insurer: 1.convertible and warrant bonds issued by the companies with BBB+ to BB+ or equivalent credit rating from the foreign credit rating agencies; 2.hedge funds, private equity funds, infrastructure funds and commodity funds; 3.collateralized debt obligations of which part of the underlying assets are below BBB- or equivalent credit rating from the foreign credit rating agencies, except those with less than 5% of its underlying assets below the above rating and were invested in accordance with relevant regulations before the promulgation of these Regulations. 4.collateralized debt obligations with such underlying asset pool based on a leverage financing structure or contains subprime mortgage loans or leverage loans. Insurers with any of the following circumstances are not allowed to conduct the investment listed in the preceding Paragraph: 1.the insurer has been subjected to major disciplinary actions in the immediately preceding year for violations of the Act with regard to foreign investment, except that the rectification of those violations has been done and get affirmed by the competent authorities. 2.the ratio of regulatory capital to risk-based capital at the end of the most recent period is less than 250%, except that the above ratio is between 200% and 250% and the insurer gets a AA equivalent credit rating or above. 3.Neither a risk management committee subordinate to the director board has been set up, nor a chief risk officer has been assigned and an interior risk management department has been established to assume de facto responsibility for the overall risk management of the company. |
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- Update： 2014-02-25
